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In this weeks economics report we take a look at shifting trends in foreign direct investment in the Czech Republic. The government introduced incentive programs to bring more firms focussing in the technology sector to further diversifying the Czech economy. Now, the program is beginning to bear fruit.

Some of the stories we follow in this weeks economics report include: Czech unemployment reaches record high. Consumers prices fall in January, Czech Republic experiences deflation for first time in history. Czech Republic's economic level to reach 59 percent of European Union average this year. LNM group purchases Czech Republic's largest steelmaker. Czech Airlines rases passenger numbers to a record 3 million. Sales of notebook computers up 23 percent 2002. Engineering firm Vitkovice launches 60 million Czech crown contract with Chinese

The coalition government of the Social Democrats, and the junior partners the Christian Democrats and the right-of-centre Freedom Union cannot reach agreement over the controversial issue of state controlled rents for about 200,000 homes in the Czech Republic. A new proposal submitted by the Christian Democrats a week ago seems to have raised the temperature still more.

The head of the Czech Statistics Office (CSU) Marie Bohata resigned last Friday. The reason was a scandal that had shaken the credibility of the institution - the publishing of substantially wrong GDP figures for the third quarter of 2002 which influenced strategic decisions by the government and Czech National Bank as well as investors and ordinary people.

The Czech Republic may need another nuclear power station, says the Industry and Trade Minister Jiri Rusnok. The Czech ministers of trade and defence have been lobbying in India on behalf of the Czech military aircraft maker Aero Vodochody. Matsushita is planning to invest another 8 million USD in a R&D facility in Czech Republic. Mobile penetration is expected to reach 90 percent in 2003.

This week we take a look at SME's, small and medium sized businesses in the Czech Republic and more importantly, some recent initiatives to help this significant component of the economy develop. Also in the program, consumer and business confidence in economy fall in January. The Czech Republic's trade surplus increases. Japan's Furukawa commences building of a new plant in Unhost. Police change founder of bankrupt construction firm, H-Systems, for hundred million crown fraud. And, rail operator, Ceske Drahy, sees the number of passengers down

Tension grows between Trade Unions and management at the largest Czech automotive company Skoda over wage increase. Production and sales of road vehicles decreased in 2002. The introduction of the ADSL technology by the dominant telecommunications operator has been delayed again. The telecommunications industry in the Czech Republic has grown remarkably in recent years. Government appoints four new members to the supervisory board of the Unipetrol oil group. Czech aircraft manufacturer Aero Vodochody steps up effort to sell its L159 light combat

Economic analysts and investors had to reconsider many of their decisions concerning Czech Republic financial affairs last Thursday due to a glaring mistake made by the Czech Statistics Office. We invited Radomir Jac, an analyst from Commerzbank to analyze the situation and explain what effect it will have on the Czech economy and its image abroad.

Can a small firm operate a successful business selling music CDs from the Czech Republic? How can e-commerce work successfully now that the Internet bubble has burst? Can a business be tied to a cultural mission? Tamizdat, a Prague-based non-profit firm selling alternative music from Eastern and Central Europe over the Internet is out to prove that all these things are possible. The following report was prepared by Katya Zapletnyuk.

Improve finances ahead of euro adoption, says CNB vice governor. Agrofert to bid for government share in Unipetrol again. Czechs will have to pay more for coffee in coming months. Biggest Czech lottery company in the money. Night-shift workers at Skoda Auto strike ahead of pay talks. Food imports up against exports. EU accession to benefit some agriculture sectors. Sales of motorbikes up by one third in Czech Republic.